To view this email as a web page, click here.

Welcome to the ShopperScape™ Newsletter September 2006 PREDICTIONS Expect online shopping will have about the same participation rates until the holiday shopping season. Prepare for a downshift in spending this month among Down Market shoppers. Expect spending among Middle Market and Up Market shoppers to remain at about the same pace as last month. Be aware that Wal-Mart Supercenter is rated "best in class" not just for delivering value but also on overall shopping experience. Other contenders making it into the top 10 on both lists also are in the food, drug and mass channels—e.g., Costco, Meijer and Target. Kmart is nowhere in sight. Prepare for women to be back in stores shopping for themselves now that the kids' back-to-school needs have been largely fulfilled. HOT OFF THE PRESS Online Shopping Up for Down Market Shoppers Overall, slightly fewer shoppers report they shopped online in August compared to April. Up Market online shopping has remained steady since April while fewer Middle Market shoppers have turned towards cyberspace for their shopping needs. But there has been an increase in online shopping activity among Down Market shoppers, likely due in part to rising Internet access and the disproportionate impact of high gasoline prices on this income segment. Overall, more than two-thirds (67%) of shoppers have shopped for products online in the past six months, down slightly from April's level (Figure 1). Up Market shoppers are the most likely to shop for products online. More than three-quarters (78%) report that they have shopped for products online in the past six months. Conversely, Down Market shoppers are still the least likely to shop for products online; however, only the Down Market has reported an increase in online shopping activity since April 2006. Figure 1 In the past six months, have you shopped for any products for non-business use from an online shopping site, whether or not you actually made a purchase online? Source: Retail Forward ShopperScape™.   SEPTEMBER CONSUMER OUTLOOK INDEX SEES SLOWER SEPTEMBER SPENDING Down Market Bears Brunt of Pullback Down Market households are poised to downshift spending the most in September. In contrast, Up and Middle Market households are expected to increase spending somewhat, in part because of the lagging effects of home buying. The Future Spending Index for Down Market households (incomes of $22,500 or less) clocked in at 92.0 in September, down from 101.5 in August. The combined impact of job and income concerns and elevated credit card debts are sending more Down Market shoppers to the retail sidelines this month (Figure 2). The index for Up Market households (incomes of $75,000 or greater) held nearly steady in September with an 89.3 reading, compared with 89.0 the month before. Slightly better income growth compared with last year and a pick-up in home buying were enough to offset rising concerns about debt burdens and weaker investment performance. Recent home buying propped up the index for Middle Market households (incomes of $22,500 to $74,999), which rose to 96.0 in September from 94.2 in August. Households in this segment also reported better investment worth compared with a year ago, helping to offset the negative impact of heightened job and income worries. Figure 2 Retail Forward Future Spending Index™ (December 2003 = 100) Source: Retail Forward ShopperScape™. The Retail Forward Future Spending Index combines households' current assessments of key drivers of spending across income segments, including the job situation, incomes, investments, debt levels, home buying, and seasonal factors to produce a forward-looking indicator of spending for the coming month. SHOPPER INSIGHTS Specialty Retailers Dominate Three-Channel Shopping Brick and mortar shopping continues to dominate retailing despite the rise of the Internet. Retail Forward's ShopperScape™ findings demonstrate how the penetration of the Internet and catalog shopping fares against in-store shopping for key retailers with a presence in all three channels. With its strong online roots, Sephora proves to have the greatest share of shoppers who also shop its Web site. More than half (51%) of Sephora's recent shoppers have shopped sephora.com, close to the 63% who have shopped in-store (Figure 3a). Lane Bryant, J. Crew and Coach each attract more than four out of 10 of their shoppers to their respective Web sites. Crate & Barrel rounds out the top five, with 39% of its past four-week shoppers going online to the Crate & Barrel Web site. Among the top five retailer catalogs shopped, Chico's is the only retailer who has more people shopping its catalog than its Web site. More than one-quarter (27%) of recent Chico's customers shop the retailer's catalog (Figure 3b). Close to one-quarter (23%) of all Pottery Barn past four-week shoppers have shopped the retailer's catalog. J. Crew (21%) and Crate & Barrel (20%) follow closely behind. Figure 3a. Past 4 Week Shoppers of Three-Channel Retailers' Web Sites* Figure 3b. Past 4 Week Shoppers of Three-Channel Retailers Catalogs* *Among retailers that have a store, Web site and catalog available to shoppers Source: Retail Forward ShopperScape™. Wal-Mart Supercenter Tops in Shopping Experience and Value Once again, Wal-Mart Supercenter takes center stage when it comes to consumer preference. Among past four-week shoppers of the retailer, shoppers are particularly fond of Wal-Mart Supercenter for best overall shopping experience and value. Among its past four-week shoppers, Wal-Mart Supercenter had the largest percentage of shoppers (35%) giving the store credit for providing the best overall shopping experience (Figure 4). Twenty-eight percent of past four-week Meijer shoppers reported that Meijer provides the best overall shopping experience while one-quarter (25%) of past four-week Target/Target Greatland shoppers feel that Target/Target Greatland offers the best overall shopping experience. Wal-Mart Supercenter is cited among its past four-week shoppers also as the retailer with the best value for the merchandise. More than four out of 10 past four-week Wal-Mart Supercenter shoppers feel Wal-Mart Supercenter offers the best value for the merchandise (Figure 5). More than one-third (34%) of past four-week shoppers at Costco think the warehouse club offers the best value for the merchandise. Figure 4 Considering all of the retailers that you have shopped in the past 4 weeks, please check the one retailer that offers the best overall shopping experience. Source: Retail Forward ShopperScape™. Figure 5 Considering all of the retailers that you have shopped in the past 4 weeks, please check the one retailer that offers the best value for the merchandise. Source: Retail Forward ShopperScape™. Food/Drug/Mass Retailers Prevail for Best Overall Shopping Experience Customer income segments differ in their views about which retailer provides the best overall shopping experience. Interestingly, ShopperScape™ results reveal that shoppers are more likely to choose retailers they shop often as the retailer they feel offers the best overall shopping experience. Food, drug and mass retailers received the highest marks when it comes to providing the best overall shopping experience. In fact, eight out of the top 10 retailers that consumers say offers the best overall shopping experience come from food, drug or mass channels (Figure 6). Nearly half (48%) of all Down Market shoppers feel Wal-Mart Supercenter offers the best overall shopping experience. Middle Market shoppers put Meijer (39%) at the top of their list. Up Market shoppers voted for Target/Target Greatland (25%). Figure 6 Considering all of the retailers that you have shopped in the past 4 weeks, please check the one retailer that offers the best overall shopping experience. Source: Retail Forward ShopperScape™. Discount Prices Determine "Best Value" Retailer ShopperScape™ results indicate that shoppers are more likely to choose a retailer with discounted prices as the store that offers the best value for the merchandise. All income segments feel Wal-Mart Supercenter offers the best value for the merchandise. Other retailers such as Costco, which appeals most to the Middle and Up Markets, and extreme-value grocers, e.g., ALDI, which appeals most to the Down Market, also are included in this "top 10" list. All income segments like to get a deal (Figure 7). Figure 7 Considering all of the retailers that you have shopped in the past 4 weeks, please check the one retailer that offers the best value for the merchandise. Source: Retail Forward ShopperScape™. GOING UP AND GOING DOWN Going Up: New Fall Wardrobes A variety of categories will see an increase in September. Women's apparel category purchases, e.g., women's lingerie, women's dress shoes, women's dress clothing and women's jeans, will be up compared to last month. Greeting cards, prescription drugs, cellular/mobile phones, toys/dolls/games, paint, and infant's and toddler's clothing will all see an increase this month as well. However, year-to-year increases will be difficult to achieve (Figure 8). Figure 8 Purchase Plans for September 2006 Source: Retail Forward ShopperScape™. Going Down: Back-to-school Winds Down With the new school year in full swing retailers can expect school-related categories to decline. Children's school supplies, home office supplies, children's shoes, boy's clothing, teen boy's clothing and girl's clothing will all see a decrease compared to last month and last year. Other clothing items, e.g., other men's casual bottoms, women's athletic shoes and men's jeans, as well as non-prescription drugs also are down from last month and last year (Figure 9). Figure 9 Purchase Plans for September Source: Retail Forward ShopperScape™. POINT OF VIEW Industry Outlook: Specialty Apparel Stores, September 2006 "Apparel and accessory stores mounted a huge comeback from the 2001 recession, with four consecutive year-to-year sales increases culminating in a 7.1% growth rate in 2005. The easy growth, however, won't continue into the latter half of the decade, when slower consumer spending, stronger deflation, maturing store concepts and increased competition from alternate channels as well as from apparel brands will weigh on sales. Already several retailers have succumbed to the tough retail environment and have been snatched up by private equity investors, other retailers and even apparel brands looking to boost their retail presence. And although several retailers have looked to new categories, concepts and countries to sustain growth, the efforts behind these initiatives likely will accelerate through the end of the decade." Kelly Tackett, Consultant, Retail Forward, Inc. For more information on the Industry Outlook: Specialty Apparel Stores, September 2006 or the Retail Forward Intelligence System™ call Kathy Clarke at 614-355-4009 or email her at kclarke@retailforward.com. New! Retail Forward Launches New ShopperScape™ Wal-Mart Panel! Wal-Mart has rocked the retail world and sent aftershocks throughout the supplier community. With two-thirds of shoppers visiting a Wal-Mart store at least once a month, its penetration into U.S. household is without precedent. Retail Forward's ShopperScape™ Wal-Mart Panel helps organizations discover the opportunities that exist within the walls of Wal-Mart. In its latest white paper, "Wal-Mart Shopper Insights: The High Demand for Low Price," Retail Forward provides an assessment of the results from its February 2006 ShopperScape™ Wal-Mart Panel. To receive a copy of this white paper and to learn more about Retail ShopperScape™ Wal-Mart Panel, contact Katherine Clarke at kclarke@retailforward.com. What's Retail Forward ShopperScape™? Retail Forward ShopperScape™ focuses on today's consumers and their shopping behaviors. Retail Forward ShopperScape™ has been fielded since November 2003 to a sample of 4,000 consumers each month. The survey gathers timely, up-to-date information about where consumers shop and what they buy. Retail Forward ShopperScape™ is administered through TNS/NFO's online household panel, weighted based to be representative of U.S. households. For more information, call Kathy Clarke at 614-355-4009 or visit http://www.retailforward.com and select ShopperScape™ under Product & Services in the navigation bar located at the top of the home page to view sample reports and learn more about how to access ShopperScape™ information. 700 Ackerman Road Suite 600 Columbus, Ohio 43202 Voice: 614 355 4000 Fax: 614 355 4059 http://www.retailforward.com To subscribe to the Monthly ShopperScape Newsletter™ or other Retail Forward newsletters, click here. If you would like to stop receiving the ShopperScape™ Monthly newsletter, please edit your content preferences here.